With a strong summer coming to an end, the Canadian Real Estate Association updated its resale housing market forecast with a slightly more positive outlook for the rest of 2019 and beginning of 2020.
Population and employment growth in Canada has been steady, and the unemployment rate has remained low. These economic fundamentals combined with the prediction that the Bank of Canada will likely not increase interest rates this year or in the beginning of 2020 amounts to more confident housing market activity.
Since the CREA’s June 2019 forecast, the First-Time Home Buyer’s Incentive has launched, allowing qualifying first-timers to enter a shared equity mortgage with the Canada Mortgage and Housing Corporation. The idea is to make saving for a downpayment easier and to lower monthly mortgage payments.
While the FTHBI will help thousands of buyers across the country enter the market, the CREA says that the lowering of the Bank of Canada’s benchmark five-year rate, which banks use to qualify mortgage applicants, is the real game changer for 2019.
This rate decrease makes the mortgage stress test slightly easier to pass, which opens the doors for more buyers. Since the beginning of 2018, the stress test has had a powerful impact on sales activity, but as interest rates relax and buyers adjust expectations, sales activity has picked up steam.
The CREA makes note of sales increasing more than expected in Ontario, and prices are “reaccelerating” in the Greater Golden Horseshoe area.
With all this in mind, the CREA predicts there will be approximately 482,000 home sales in Canada this year, which is 5% higher than the five-year low hit in 2018. This marks a return to the 10-year annual average. In Ontario, sales are coming in around the 10-year average for the province.
By the end of 2019, the average home price will be $491,000, which is a 0.5% year-over-year increase, only slightly better than the previously forecasted drop of 0.6%. Ontario home prices are expected to climb.
Early predictions for 2020 see national home sales jumping 7.5% to 518,100 units sold. Ontario will see a 7% jump in activity in 2020. The national average price for next year is forecasted to increase 2.1% to $501,400. Keep in mind the CREA will continue to adjust the resale market 2020 forecast.